Macy’s Shares Fall Following Q3 Outlook Despite Q2 Earnings Beat

Macy’s shares fell in premarket trading because a weaker-than-expected third-quarter outlook overshadowed a second-quarter earnings beat driven by one-time tariff refunds. The retailer exceeded analyst expectations for the period ending in August, but management signaled pressure from shifting consumer demand and macroeconomic conditions.

"We experienced softer trends in plus sizes, intimates, and women's sleepwear," said Antony Spring, Chairman and CEO, during the company's earnings call.

Q2 Performance and Tariff Impact

Macy's reported adjusted earnings per share of $0.63 for the second quarter, surpassing the consensus estimate of $0.37, according to a Benzinga report. These results were bolstered by a $98 million windfall from IEEPA tariff refunds received during the quarter, providing a $0.23 net benefit to the adjusted EPS. An additional $18 million in refunds was collected after the quarter closed.

The refunds provided a temporary cushion, yet operational costs remained a factor. Thomas J. Edwards Jr., COO and CFO, noted that tariff and fuel costs "impacted the quarter by approximately 10 basis points."

Weak Q3 Guidance

The market reaction focused on the company's forward-looking guidance, which missed analyst expectations. Macy’s projects an adjusted third-quarter loss of 19 to 23 cents per share, wider than the 6-cent loss previously estimated by analysts.

This outlook reflects the challenges the retailer faces in aligning its inventory with current consumer preferences. To address these gaps, the company is focusing on operational shifts, including the expansion of its AI-powered conversational shopping assistant to in-store staff.

"To help deliver the best Macy's at every touch point," said Spring regarding the company's strategic priorities for the remainder of the fiscal year.

Strategic Challenges

The reliance on one-time items like tariff refunds to beat quarterly expectations highlights volatility in the retail sector as companies manage inventory in a high-cost environment. The shift toward AI-integrated shopping tools represents an attempt to modernize the in-store experience, though the immediate financial impact of these technological investments remains secondary to the struggle with apparel sales trends and the current guidance for a loss-making third quarter.